Verity, Fast Search & Transfer, Autonomy, and Convera plugged away at enterprise search unnoticed for years. Then Google tested the waters, and worked at it until it became very cool, which has given everyone good reason to work on better, easier-to-implement tools.

, Fast Search & Transfer, Autonomy, and tested the waters, and worked at it until it became very cool, which has given everyone good reason to work on better, easier-to-implement tools.

Now worth at most only $1 billion, the enterprise search market will get much bigger, say analysts, VCs, and industry executives. But most analysts don’t really know how much bigger, because no one anticipated this sudden revival of interest in enterprise search.

“It’s the drag effect of Internet search,” says Verity CEO Anthony J. Bettencourt. “Internet search has become so popular and lucrative, that all different kinds of search are hot.”

Web surfers who have grown dependent on mining the Internet for information now want an equally efficient tool for digging into today’s vastly more complex Intranets. And there’s another reason for developers to look sharp: Companies facing court challenges, often based on revealing slices of internal data and emails, need pinpoint access to inside information.

While there are many enterprise search tools out there, none offer the web-level efficiency of Google and Yahoo. “IT groups within companies have implemented multiple search technologies across different software areas, [but] users often have to contend with four to eight search engines to answer one question in a business,” says Hadley Reynolds, a Delphi Group analyst.

Delphi

But now, consumers want to bring their web search experience to their work, and therein lies the problem, says Ali Riaz, COO and CFO of Oslo, Norway-based Fast.

“There’s no flexibility in enterprise search—people are looking for a specific invoice, a specific document,” says Mr. Riaz. “But there’s a huge problem in grabbing onto all kinds of different information—it’s very hard to index from just any source.”

People search for general as well as very specific things online. But more often than not, it’s much easier to find a document that resides on the web than in the internal vaults of a company. Companies don’t typically link content and data, leaving it to pile up in assorted content management systems. If Google has been successful on the net, it was due to its methodology of pulling up search results on the basis of popularity and relevance, which is relatively easy on the net, where pages can link to one another. The enterprise works differently.

Google, the Upstart

Undeterred, Google is forging ahead. “It’s a pretty big and growing priority right to the top of the company,” says Dave Girouard, the general manager of enterprise search at Google. He adds that the founders are investing more in it.

Analysts—AmericanTechnologyResearch’s David Edwards and JupiterResearch’s Gary Stein among them—have often said that the Mountain View, California-based search giant needed to diversify revenues. Enterprise search opens up another revenue stream. Even though Google has broadened out from pure search into becoming a media company offering email and instant messaging, it still relies primarily on online advertising for revenue.

“The Google enterprise offering has been wildly successful—their brand is a huge advantage,” says Mr. Reynolds. “The appeal they have on the web—that’s the appeal for the enterprise.”

Part of the reason for Google’s appeal, adds Mr. Reynolds, is that its appliance, a mixture of hardware and software, is fast to set up and easy to use. Most competing enterprise search applications are hard to configure, and just as hard to operate.

While enterprise search accounts for only a small fraction of Google’s revenue— Mr. Girouard won’t specify how much, but claims it doubles every year—it’s a profitable segment in itself.

That may be true, but Google’s keyword-based offering isn’t as advanced as many of the other products on the market. Established players bring extras to the table—like K2, Verity’s enterprise search offering, or Fast’s Data Search—that Google still can’t.

Old GuardIn a field that includes Verity, Fast, and Autonomy, Google remains the challenger. And even if their stock prices falter (like Verity’s dropping 19 percent in nine months), revenues for the incumbents have steadily grown: Sunnyvale, California-based Verity’s revenue grew 15 percent, to $142.6 million, in fiscal 2005; Fast’s revenue jumped 50 percent, to $63.6 million, in 2004; while Cambridge, U.K.-based Autonomy revenue rose 18 percent, to $64.8 million, in 2004.

The surge of interest in enterprise search has spurred these companies to improve their products, which can still prove cumbersome to use. They have put a lot of emphasis on natural language research to better interpret what someone types into a box. They have features that range from expanding queries to extracting facts to analyzing voice streams and video presentations. And each one has a niche it specializes in.

Verity, which according to the Delphi Group is the biggest in terms of branding or market share, targets the small- to medium-sized business (SMB) market, focusing on areas like the Intranet search box, secure process applications, and desktop search for email and other such unstructured data.

Fast makes its money from three primary sources, with half the revenue coming from e-commerce businesses. Government agencies and organizations looking for a search function to power Intranets make up 35 percent, and original equipment manufacturers bring in the remaining 15 percent.

Autonomy is big in vertical search, and offers relatively lower-priced products targeting specialized categories. It has customers in sectors ranging from energy and utilities to life sciences and healthcare.

“For 15 years, nobody did anything except to add search engines, such as a search engine in email, in an Intranet portal, in a content management solution,” says Delphi Group’s Mr. Reynolds. “People were aware that multiple search engines were counterproductive, but hadn’t done anything about it.”

He predicts two big trends: consolidation of all these engines, and “federated search,” the capability to look across different sources of information to get the complete picture.

Enterprise search may now be cool, but it’s also needed more than ever. New regulatory requirements such as Sarbanes-Oxley and the increasing use of email in litigation have executives responsible for compliance itching for pinpoint access to everything from structured data to email.

Fertile Ground

The interest from all directions obviously means that a lot of startups will start to eye this business. And as the requirement of the moment seems to be good, low-cost search, that’s what they’ll come to the market with.

“The big challenge for some of the [existing] companies is… how do we get to the point where we can quickly get search running and configure what [someone] wants from advanced functions?” says Matt Brown, a Forrester analyst. “That’s where the big guys typically get dinked. It takes a long time and a lot of cost.”

But they should be used to competing with startups. Ronald Weissman, a partner at VC firm Apax Partners, estimates there are more than 200 companies working on enterprise search. “It’s a fragmented market,” he says. “It’s not a market in which lots of companies have been consistently profitable.”

To win big, it won’t be enough to just have a better formula for processing information, says Mr. Weissman. Developers will have to change the dynamics of enterprise search—like ratcheting up speed, pressing ahead with search engine consolidation, and enabling access to both structured and unstructured data.

Results of a recent Delphi survey should inspire the enterprise search players. It found that 32 percent of executives expect their organizations to upgrade their search facilities this year. Companies are looking to spend on search. They’re just waiting for the perfect dish to be served.